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Understanding Section 179 for Your Small Business

Most small businesses point to access to capital as the number one hurdle in growing their business. With it, they can hire, purchase inventory, upgrade equipment, and increase marketing efforts. But even the application for that funding can be cumbersome.

To help you or another small business gain access to capital, our affiliate partner Kabbage reviews basic business information to understand performance and deliver flexible funding online or through their app. It's a modern-day solution to an age-old problem.

Courtesy of Kabbage

 

Their site is brimming with helpful resources for small businesses from their blog to case studies to their small business toolkit. But here, we're going to focus on one specific issue: section 179.

Section 179 applies to tax deductions for business depreciation of property. While it won’t increase the overall deduction you can take, it does give small businesses an option to take their deduction more quickly. With Section 179, a company can deduct the full value of certain business equipment purchases in the same tax year that the purchases are made, instead of spreading it out over many years.

We asked Kabbage to break down the details of Section 179 to help make it clear and simple.  

What companies can use a Section 179 deduction?

Section 179 is applicable for companies that spend less than $2 million per year on qualifying business purchases.

What kind of property qualifies for Section 179?

Deductions can be used for tangible personal property purchased for your business that the IRS has determined will last more than one year. The types of property include computers, software, office furniture, business equipment, machinery, and certain vehicles.

Deductions can only be used for property that is primarily used for business. You must use the property for business more than half of the time, and the amount of your deduction is reduced by the percentage of your personal use

Is there a limit to the deduction amount?

Currently Section 179 has a $500,000 limit on the total amount of business property expenses that can be deducted per year.

What are some examples of property that would not qualify for Section 179?

Certain types of property are not applicable for Section 179. These would include land and permanent structures, furnaces or air conditioning units, any property meant for use outside the U.S., intangible property such as copyrights or patents. Additionally, property that you inherit, obtain from an organization you control, or could purchase from a relative would be disqualified.  

 

For more information, review the official Section 179 website.

Understanding Section 179 can help you decide when to take a deduction or decide what property could be purchased to help your business expand.

If you need working capital to help fund a Section 179 qualifying purchase, Kabbage offers business lines of credit up to $150,000. Their online application doesn’t require any paperwork and you get a decision right away. Learn more about Kabbage and how they can help fund your next big business purchase.

 

DISCLAIMER: Neither The Grommet, Kabbage, or this article provide professional tax advice; it is only intended to be informational and build awareness about possible tax deductions that business owners might qualify for. Individual tax circumstances may vary. Please talk with your accountant or other professional tax advisers before claiming any deductions.

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